Kakao Bank’s debut
Regulations need to be eased for mobile banking revolution
Internet banks are emerging as game-changers in Korea’s banking industry.
On Thursday, customers flocked to open accounts at Kakao Bank, the second internetonly bank, after K bank which was launched in April by a consortium led by telecommunications provider KT. Kakao Bank was established through a consortium led by Kakao Corporation, the operator of the country’s leading messaging app KakaoTalk that has over 40 million users in Korea.
Many Koreans have been looking forward to the opening of an internet bank by Kakao Corporation, which has facilitated people’s everyday lives with various mobile services like KakaoPay and KakaoTaxi. During the first day of operations, Kakao Bank opened more than 300,000 accounts.
More people are using mobile devices to take care of their banking needs because of the speed and accessibility of mobile banking. Without paperwork, one can open an account in less than 10 minutes just by downloading a mobile application and verifying personal information online. Internet banks offer lower borrowing rates and higher interest for deposits than conventional banks.
Kakao Bank has some noticeable edges when compared with its rival K bank, such as a more convenient money-transfer service through its mobile messenger KakaoTalk. One can send money to a friend through KakaoTalk even without an account number. It also offers cheap overseas transactions. Kakao Bank charges about 5,000 won ($4.48) for international wiring service, whereas conventional banks charge about 55,000 won.
The rise of internet banks is not just good for customers, but it also helps improve the services of traditional commercial banks.
Traditional banks are stepping up efforts to attract customers to deal with rising competition from internet banks. KB Kookmin Bank has started a mobile loan service with simplified paperwork. Woori Bank has started a move to slash overseas transfer fees through their internet and mobile services.
The launch of Kakao Bank has highlighted the need to ease outdated regulations that hamper the growth of internet banks such as the Bank Act that separates financial and industrial capital and prohibiting nonfinancial firms from possessing more than 10 percent of bank stocks or 4 percent of voting stocks. This rule is aimed at preventing chaebol from controlling financial firms, so it is wrong to apply it to startups like web-only banks.
The National Assembly has been sitting on revision bills intended to ease regulations and other special legislation to promote the mobile banking sector, such as one to allow IT companies to hold up to 34 percent of banking shares. The Nationl Assembly should quickly act on these bills to expand the mobile banking sector and raise the industry’s global competitiveness.